Avnet: Focus on Perfection

Avnet's Arizona distribution center is one of the company's best sales tools.

Avnet Inc.'s Logistics and Solutions Center in Chandler, Ariz., is at the heart of its Electronics Marketing Group's ability to deliver semiconductors and other components to industrial, commercial, and military customers.

One of the world's largest B2B distributors of electronic components and computer systems, Avnet serves customers in 63 countries. Avnet works with more than 250 component and systems makers, distributing their products to 100,000 other manufacturers.

Now 402,000 square feet of state-of-the-art space, the Chandler DC started out as a 152,000-square-foot multipurpose facility. When Avnet moved into the building in 1987, it included offices for sales staff, a computer marketing operation, and just 80,000 square feet of warehouse space, says Jim Smith, senior vice president of operations for Avnet's Electronics Marketing Americas. Since then, the facility has expanded four times.

Thanks to careful planning and thoughtful expansion, today's DC "is one of our best sales tools," Smith says. "We use it for customer tours, and our corporate investor relations group brings investment groups to tour the facility." Not bad for a facility that started out as the home of a small glass company.

Avnet expanded the building in the 1990s to absorb the companies gained during a major acquisition push. Another expansion involved back-end operations, and Avnet's global computer system is now housed at the Chandler facility. About four years ago, the distributor expanded the warehouse space to its current footprint.

Thanks to that expansion, the DC is a far cry from what it was just five years ago. "We were a typical standard concrete tilt-up warehouse with static shelving from which people picked product—without the aid of much automation," Smith explains. "The facility has gone from a typical warehouse that you'd see in any industrial center to a logistics operation in a clean room environment."

The renovated facility is air-conditioned, with bright, white walls and spotless concrete floors covered with a special coating designed to minimize electrostatic discharge. The DC uses several storage methods, including bin shelving, pallet racking, more than 80 carousels, and H shelving for products that are larger than a shoe box.

Add to that wire-guided very narrow aisle equipment, three miles of smart conveyors, bar-code scanning technology, and an advanced warehouse management system (WMS), all working together to manage more than 100,000 SKUs.

The facility today employs 300 people in the distribution center, with another 100 working on programmable logic devices in a value-added light assembly operation. The DC is a staggered shift operation, opening at 4 a.m. to receive inbound freight. The two-shift outbound operation is scheduled so that orders that are placed until 5 p.m. local branch time can be picked and shipped the same day.

From Homegrown to Sophisticated

Avnet began its search for a replacement for its homegrown paper-based warehouse management system in the mid-1990s. The legacy system had been embellished and enhanced over time, and had served Avnet well. But it didn't have the flexibility or robustness needed to handle Avnet's growth.

"In the late 1990s, transaction volumes exceeded anything that we'd ever experienced before," Smith says. "We needed to find a solution that would enable us to continue to acquire companies and grow our business."

Avnet worked with a consulting firm to identify system requirements and evaluate a number of warehouse management systems, looking for the system that could best handle Avnet's volumes, grow as the business grew, and provide breakthroughs in performance. In addition, Avnet wanted a system that would:

Enable same-day receipt and put-away.

Increase order throughput.

Reduce pick-to-ship cycle time.

Reduce errors.

Replace physical inventory with system-directed cycle counting.

Improve shop floor order visibility

Expand the daily shipping window by enabling sales branch order cut-off times to be extended.

Increase overall efficiency.

Enhance statistical process control tracking capabilities.

Avnet selected Optum Inc., White Plains, Ill., to install its WMS in the mid-1990s. But the WMS implementation was put on hold several times so that Avnet could handle its incredible growth.

"When a company is in acquisition mode, it has to move into crisis management in order to integrate its acquired companies rapidly and seamlessly," Smith says. That was the case for Avnet.

As a result, when Smith came on board three years ago, the majority of transactions were still being handled by the distributor's legacy system, with the new WMS handling a small fraction.

"Then we got serious about the WMS implementation, and concentrated on implementing the Optum solution," Smith explains. "We took our best employees off the job and dedicated them fully to the project."

System modifications and testing had largely already been done, so the implementation team was able to focus on training. Super users (warehouse associates and supervisors) who were trained by Optum in turn trained users on the new system.

"We developed and built a training lab that included a classroom environment and a hands-on training environment, a mock warehouse where users could learn how the system worked," explains Scott Garrett, director of warehouse operations for Avnet.

The WMS was phased in over time. Products were classified by manufacturers, then split into smaller groups. Different manufacturer groups were transitioned to the new system throughout the course of the year. By January 2002, all transactions for all manufacturers were processed through Optum's MOVE WMS.

Working with the new system has enabled Avnet to change the way it operates. "The old system required specialization, which meant that we had a person who was very skilled at performing a certain function within the warehouse. But this didn't provide an opportunity to increase throughput in the facility," Smith explains. The new WMS enabled Avnet the ability to crosstrain its workforce.

Crossstraining Proves Valuable

"The crosstraining program was implemented right after we went live with the new system," Garrett says. "The system gave us the ability to mine data, capture productivity numbers, and identify training needs."

Associates receive incentives to learn how to do other jobs in the warehouse. "The more jobs they know, the more valuable they are to the company," Smith notes. "So they go back through the training lab to gain additional skills and build their knowledge."

The crosstraining also gives associates a fuller picture of warehouse operations, engaging them in continuous improvement and enabling them to make informed suggestions on how to improve processes and performance throughout the DC.

"We have a remarkable environment in this facility," Smith says, "a culture where people's focus is totally on perfection." Such a culture begins with leadership commitment and shared values.

Another important factor is a pay- for-performance program. Through this program, warehouse employees can earn incentive pay based on how the facility performs in the areas of quality, cost, and productivity. The program has group and individual goals. For example, associates need to meet quality, attendance, and punctuality goals to qualify for the incentive pay.

"This is at an all-time record high," Smith says. "We're at 99.9-percent-plus every day—many days, we hit 100 percent." In addition, he says, "absenteeism and tardiness are the lowest they've ever been."

The future is bright. Avnet is talking with Optum about upgrading to MOVE 7i, its latest version, which Smith expects will help boost performance even more. And, if the distributor's growth requires another expansion of the DC, Smith is ready.

"We own some land adjacent to the facility so we can expand its footprint if we need to by another 200,000 square feet."